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Anatomy of the PBM Model

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  Published in Business and Finance on Monday, December 22nd 2025 at 13:24 GMT by Forbes

A Unique Purview of a Broken Pharmacy Benefits Ecosystem
Forbes Business Council – 22 Dec 2025

The Forbes Business Council article titled “A Unique Purview of a Broken Pharmacy Benefits Ecosystem” offers a sobering, data‑driven look at the tangled world of pharmacy benefit management (PBM) and the ripple effects that have left patients, pharmacies, and payers scrambling. Written by a seasoned pharmacist‑turned‑industry analyst, the piece pulls from the author’s own experiences in the trenches of PBM negotiations, recent legislative updates, and the latest consumer‑centric studies. The writer invites readers to view the industry through a lens that balances clinical knowledge, financial acumen, and patient advocacy.

1. The Anatomy of the PBM Model

The article begins with a clear primer on PBMs, explaining their “four‑step” role:

1. Formulary Design – Setting which drugs a plan will cover and at what tier.
2. Negotiating Rebates – Working with manufacturers to secure discounts on branded drugs.
3. Administrative Oversight – Processing claims and ensuring reimbursement accuracy.
4. Data Aggregation – Generating analytics for payers and pharmacy networks.

While PBMs were born to reduce costs and improve drug utilization, the author argues that the system now operates as a “black box.” He underscores how the rebate model, designed to give payers a lower price on a drug, often leaves the final savings on the table. A key point: rebates are typically kept private, and the “net cost” that patients ultimately see is frequently higher than the pre‑rebate price.

The piece also references a Forbes Business Council post, “Understanding Pharmacy Benefit Management: The Big Picture,” which the author cites to highlight how the PBM model has evolved from a simple middleman to a conglomerate with vertical integration—owning large pharmacy chains, specialty pharmacy networks, and even data analytics firms. This consolidation creates a conflict of interest that the article later critiques.

2. Broken Transparency: The “Rebate Mirage”

A central theme is the lack of transparency in rebate calculations. The author uses a real‑world example from 2023 when a major health insurer disclosed a $3.5 billion rebate on insulin, yet the average out‑of‑pocket cost for a 30‑day supply remained unchanged. He quotes a 2024 consumer‑price‑watch report that found that for every $10 rebate, patients paid an additional $3 in co‑pays.

The article delves into three ways the rebate system distorts pricing:

• Rebate‑Driven Formulary Bias – PBMs preferentially place drugs that offer large rebates on lower tiers, discouraging the use of generics that would actually save patients money.
• Manufacturer‑PBM “Deal‑Making” – Deals are often negotiated behind closed doors, with manufacturers gaining market share in exchange for discounts that do not trickle down to patients.
• Data Silos – PBMs claim “real‑time” analytics but rarely share the data with payers or providers, making it difficult for stakeholders to verify that savings are actually realized.

The author links to an independent study by the American Health Policy Institute that quantified how 42 % of the rebate money goes to the PBM as a fee, leaving only 58 % for the payer and patient. The stark disparity fuels the article’s argument that the current system is “inherently broken.”

3. Impact on Key Stakeholders

a. Patients

Patients experience high out‑of‑pocket costs and confusing tier structures. The author shares an anecdote about a senior citizen who switched pharmacies because the “preferred” pharmacy was unable to dispense her insulin on a lower tier due to a restrictive formulary, forcing her to travel an extra 20 miles daily.

The article cites the 2025 National Health Interview Survey, showing that 28 % of Americans report drug cost‑related non‑adherence. The piece argues that the rebate model fails to mitigate this problem, as the savings never reach the pharmacy benefit contract the patient signs.

b. Pharmacies

Independent community pharmacies feel squeezed from the middle. They pay a larger portion of rebates to PBMs and must navigate a labyrinth of electronic claim systems. The author references a 2024 Journal of Pharmacy Practice study that found a 15 % decline in independent pharmacy revenue over the last five years, largely tied to PBM contract pressure.

c. Payers and Employers

Employers, the main purchasers of PBM contracts, are stuck with opaque pricing structures that do not correlate with actual savings. The article cites a 2025 report from the American Hospital Association that highlighted that 61 % of employers believe PBM pricing is too complex to manage.

4. Emerging Alternatives and Legislative Efforts

The article explores a handful of alternatives that might recalibrate the broken ecosystem:

• Direct‑to‑Consumer (DTC) Pharmacy Models – The author argues that DTC models, which eliminate intermediaries, have proven cost savings of up to 12 % for certain drug classes.
• Transparent Pricing Mandates – He references the 2024 Patient‑Centric Drug Pricing Act, which requires PBMs to publish net drug costs and rebate amounts to the public.
• Patient‑Centric PBM Designs – Emerging PBMs that align incentives with patient outcomes rather than rebates are discussed. The author notes that a pilot in Oregon saw a 7 % drop in generic drug usage costs over 12 months.

The piece links to a Forbes Business Council article, “The Future of Pharmacy Benefits: From Rebate to Transparency,” which outlines best practices for implementing transparent models and the regulatory steps needed.

5. A Call to Action

The author ends with a rallying cry: “We need to dismantle the rebate‑centric model and replace it with a system that rewards actual savings and patient outcomes.” He urges:

1. Employers to renegotiate PBM contracts with a focus on net price transparency.
2. Legislators to enforce strict disclosure requirements for rebates and PBM fees.
3. Pharmacy Leaders to form coalitions that push for tier‑based pricing that genuinely reflects market costs.
4. Patients to advocate for clearer communication about how their drug costs are calculated.

The article concludes by reminding readers that the pharmacy benefits ecosystem is not just a business concern—it’s a public health issue. The author invites stakeholders to join the conversation on Forbes Business Council forums and to share data that can help drive meaningful reform.

Key Takeaways

• PBMs are opaque: rebates are hidden, savings do not always reach patients.
• Three main stakeholders suffer: patients, pharmacies, and payers.
• The rebate model incentivizes high‑tier drugs over cheaper generics.
• Transparency and regulatory reforms are on the horizon but need stronger enforcement.
• Innovative models like DTC pharmacies and outcome‑based PBMs offer promise.

By weaving together personal anecdotes, industry statistics, and references to other Forbes Business Council content, the article provides a compelling, data‑rich summary of why the pharmacy benefits ecosystem is broken and what steps are required to rebuild it for the benefit of everyone involved.